Dell bundling DSL modems

LAS VEGAS--Dell and Compaq see eye to eye on one thing: the enormous sales potential for coupling personal computers with high-speed modems.

On the heels of Compaq's rollout on Monday, Dell announced yesterday that it is shipping PCs
with high-speed digital modems from Cisco
Systems in conjunction with service from telecommunications giant US
West.

Dell now offers the DSL modems as an option on its Dimension line of home
PCs. A Dimension PC with Cisco ADSL modem, 333-MHz Celeron processor from
Intel, and a 15-inch monitor will cost
$1,399, Dell said. The high-speed modems will be available as an option for
$199.

Dimension owners living in 14 cities, including Denver, Phoenix, Seattle,
and Portland, will be able to access US West's MegaBit service, which costs
$59.95 per month.

Both Compaq and Dell see the incorporation of high-speed modems as key to future PC sales, as connection to the Internet has become a major reason for buying computers. As the trend continues, Net connection speeds may begin to eclipse chip speeds as the most significant yardstick for a computer?s performance.

"Moore's law is still true. But you have to get your priorities straight," said Carl Everett, senior vice president in charge of personal systems at
Dell, describing the observed doubling of processor speeds about every 18
months but suggesting increasing modem speeds are becoming more important.

In other words, as people spend more time on the Net, a computer?s speed is perceived more through its online fleetness than on its number-crunching prowess.

Monthly fees for the service will begin at roughly $40. Compaq is targeting these price points also. "Once you get below $50 [for high-speed modem service] 70 percent of PC users express a strong interest," said Rod Schrock, senior vice president in charge of the consumer product group at Compaq.

Dell said the service will capitalize on its direct sales model because Dell can find out where a customer lives when they call to order and configure a computer. Once this is determined, they can tell the customer what level of service is available in their region and, if it is available, help the customer to set it up.

In fact, for this reason, Compaq is also going direct with its high-speed modem equipped PCs launched on Monday.

Everett said Dell will offer speeds of 7 mbps (megabits per second), which is almost five times faster than the "G Lite" standard-based modems Compaq discussed on Monday. A 1.5-mbps G Lite modem is roughly 25 times faster than today?s 56-kbps modems, though connection speeds for all DSL modems can vary greatly depending on location and sophistication of service.

Everett also said Dell should be ready to offer similar hardware-service bundles with SouthWest Bell and Bell Atlantic sometime in the next few months.

The announcement comes in the wake of a series of previous tie-ups. In October, Dell and Internet service provider @Home Network agreed to make sure @Home service works with cable modem-ready PCs in Dell's Dimension line for home and small business consumers. By early next year, the companies said, the partnership should result in availability of Dell PCs customized for cable modem service in areas where the @Home service is available in North America.

The service provided by @Home enables users to download at typical speeds
of between 1.5 and 3 mbps.

This is all part of Dell's move to enhance its "ConnectDirect" initiative. The computer maker has also hooked up with SBC
Communications for DSL access.

SBC, which owns telecommunications companies such as Pacific Bell and Southwestern Bell, is jointly marketing
DSL Internet access service with Dell in select Texas and California
cities.